Before Haselton, Presiding Judge, and Armstrong and Rosenblum, Judges.

HASELTON, P. J.

Reversed and remanded.

HASELTON, P. J.

This shareholder derivative action is before us on remand from the Oregon
Supreme Court. See Crandon Capital Partners v. Shelk, 202 Or App 537, 123 P3d 385
(2005) (Crandon I); Crandon Capital Partners v. Shelk, 342 Or 555, 157 P3d 176 (2007)
(Crandon II). Plaintiffs appeal the trial court's judgment denying attorney fees. In our
first opinion, we held that the underlying dispute had become moot before the trial court
addressed the asserted entitlement to fees, and that, therefore, the court lacked jurisdiction
to enter such an award. The Supreme Court reversed that decision and remanded to us to
address the merits of the parties' remaining contentions. For the reasons that follow, we
reverse and remand.

Our previous opinion described the factual background for this dispute in
some detail. We recite from it for convenience:

"In their first consolidated complaint, plaintiffs alleged claims for
breach of fiduciary duty, abuse of control, and waste, all arising from
Willamette's rejection of Weyerhaeuser's offer. Plaintiffs alleged that
Willamette's directors refused to consider Weyerhaeuser's offer in good
faith and that the directors used unlawful entrenchment measures (a series
of 'golden parachutes' and 'poison pills' [described more fully below]) to
deter Weyerhaeuser's potential acquisition. Plaintiffs' prayer for relief
sought an injunction eliminating the alleged entrenchment measures,
attorney fees, and damages.

"During the pendency of the litigation, Weyerhaeuser continued in
its attempt to purchase Willamette. However, on December 10, 2001,
Willamette announced that it was beginning its own negotiations with
Georgia Pacific Corp. (GP) to purchase GP's building products division.
Weyerhaeuser made it clear that the proposed deal with GP would render
Willamette undesirable and that, if the transaction were completed,
Weyerhaeuser would discontinue its efforts to acquire Willamette.

"Crandon and Brown regarded the potential GP transaction as a
further entrenchment measure (a 'suicide pill') designed to thwart
Weyerhaeuser's advances. Consequently, on December 18, 2001, plaintiffs
filed a second amended complaint, which styled the proposed GP
transaction as an unlawful entrenchment measure; plaintiffs again sought an
injunction, attorney fees, and damages.

"On January 4, 2002, Willamette stockholder Wyser-Pratt
Management Co. (Wyser-Pratt) filed a derivative complaint in Multnomah
County Circuit Court. Like plaintiffs' second amended complaint, the
Wyser-Pratt complaint was filed in response to the proposed GP transaction
and also sought injunctive relief precluding such a transaction.

"Willamette moved to consolidate the Wyser-Pratt action with the
previously filed Crandon and Brown actions. Wyser-Pratt moved for
expedited discovery and a preliminary injunction to stop the GP acquisition.
On January 16, 2002, the trial court heard arguments on both Willamette's
motion to consolidate and Wyser-Pratt's motion for expedited discovery.
Although attorneys for Crandon and Brown were present at the hearing,
only attorneys for Wyser-Pratt presented argument. After ruling that the
three actions would be consolidated, the court commented:

"'[I]t seems to me, from the plaintiffs' allegations, [that the GP
acquisition is] something that would in fact--affirmative steps,
maybe not completed yet, but affirmative steps that would prevent
the takeover and entrench the board.'

"After the court made those comments, but before the court rendered
any ruling, Willamette's attorneys stipulated that Willamette would allow at
least 48 hours between the time it announced an agreement with GP and the
time it finalized that transaction. The 48-hour waiting period would allow
plaintiffs and the court to review the final terms of any acquisition
agreement.

"On January 21, 2002, Willamette accepted Weyerhaeuser's offer
and agreed to sell at a price of $55.50. Thereafter, the tender price was paid
out to the shareholders. Plaintiffs never sought to restrict or enjoin the
distribution of any part of those funds as a possible source of the payment
of attorney fees.

"On March 21, 2002, two months after Willamette accepted
Weyerhaeuser's offer, plaintiffs filed a motion for an award of attorney fees.
The gravamen of that motion was that plaintiffs were entitled to attorney
fees because plaintiffs' efforts had 'force[d] defendants to comply with their
fiduciary obligations to the Company and its shareholders and respond to
Weyerhaeuser's offers in good faith.' Plaintiffs contended further:

"'Now, after 15 months of litigation, defendants have finally caved
in, removed their improper defensive measures, agreed to a merger
between Willamette and Weyerhaeuser, and abandoned a proposed
acquisition by Willamette of the liability-ridden building products
division of [GP]. By acquiescing to demands made by plaintiffs,
defendants have conceded to plaintiffs' primary claims. Continued
litigation of plaintiffs' claims is not necessary as plaintiffs have
obtained the substantive relief they sought.'"

CrandonI, 202 Or App at 540-543 (footnotes omitted; some bracketed material in
original).

At this point, it is necessary for us to diverge from the facts recounted in our
earlier opinion to provide additional detail that is relevant to the issues before us on
remand. In early March 2002, before plaintiffs filed their motion for an award of attorney
fees, Willamette had filed a motion to dismiss plaintiffs' second amended complaint.
After plaintiffs filed their motion for attorney fees on March 21, and while Willamette's
motion to dismiss the complaint was still pending, Willamette filed a response to
plaintiffs' motion for fees, raising myriad objections.

The trial court denied plaintiffs' motion for attorney fees, determining that,
under Mulier v. Johnson, 332 Or 344, 29 P3d 1104 (2001), plaintiffs' second amended
complaint did not adequately allege a basis of entitlement to attorney fees, as prescribed
in ORCP 68 C(2)(a). The court did not, however, rule on Willamette's pending motions
to dismiss plaintiffs' second amended complaint.

Plaintiffs then moved, inter alia, for leave to file a supplemental complaint,
pursuant to ORCP 23 E, to allege their entitlement to attorney fees. The trial court
granted that motion over Willamette's objection. The court then granted Willamette's
motion to dismiss plaintiffs' second amended complaint (because the substantive claims
were moot), except "as to the claim for attorney fees under a catalyst theory." Plaintiffs
subsequently filed what they styled as a "Third Amended Consolidated Complaint for
Attorney Fees," in which the sole "claim for relief" was a claim for attorney fees under
the theory that their conduct in filing the shareholder derivative actions had resulted in a
benefit to Willamette and its shareholders by causing the Willamette board to abandon the
GP deal, remove its entrenchment measures, and agree to sell the company to
Weyerhaeuser at a favorable price. Plaintiffs later filed another statement of attorney
fees.

Willamette responded by filing a motion for summary judgment against
plaintiffs' third amended complaint, arguing that, under ORS 20.077, plaintiffs could not
recover attorney fees because they had not prevailed on any claim for which attorney fees
could be awarded. Alternatively, Willamette moved for partial summary judgment,
arguing that plaintiffs were not entitled to recover attorney fees incurred after January 21,
2002, the date of the merger. Willamette also filed legal and factual objections to
plaintiffs' statement of attorney fees.

After extensive briefing, the trial court denied Willamette's motion for
summary judgment on the basis of ORS 20.077 but granted its motion for partial
summary judgment. The court also directed the parties to submit supplemental briefing
on the question whether plaintiffs were barred from recovering their attorney fees for
litigating the case on the merits because they had failed to preserve, from the proceeds of
the merger, a fund from which the fees could be paid.

On December 5, 2003, the trial court held a hearing on Willamette's legal
objections to an award of attorney fees to plaintiffs based on "the absence of a common
fund from which to pay an attorney fee award." As we related in our earlier opinion:

"Ultimately, after reviewing voluminous submissions on fee entitlement in
corporate derivative suits, with particular emphasis on Delaware case law
addressing arguably analogous circumstances, the court determined that
plaintiffs were not entitled to recover fees. That ruling rested on two
principal premises: First, the primary benefit that plaintiffs had sought was
enhancement of the price of Willamette shares, including through
Willamette's acceptance of Weyerhaeuser's tender offer. Second, in
derivative cases involving claims for attorney fees based on securing such a
common pecuniary benefit, a plaintiff is required to enjoin the distribution
of at least a portion of the tender price so as to segregate and maintain a
fund from which fees can be paid by those who benefitted from the
attorneys' efforts. That is, as an equitable matter, the benefitted
shareholders of the acquired company--and not the shareholders of the
acquiring company--should bear the cost of efforts that increased the buyout
price. Because that prerequisite was not met here--the tender price had
been fully disbursed--plaintiffs could not recover fees."

Crandon I, 202 Or App at 543. The court consequently denied plaintiffs' request for
attorney fees and entered final judgment in favor of Willamette.

Plaintiffs appealed, asserting two assignments of error. They argued, first,
that they were entitled to attorney fees under the "common benefit" doctrine and that the
trial court erred in concluding that they were barred from recovery due to the absence of a
monetary fund from which those fees could be paid. In their second assignment of error,
they challenged the trial court's grant of partial summary judgment in favor of Willamette
on the question whether plaintiffs were entitled to recover for attorney fees incurred in
preparing and litigating the fee petition (the so-called "fees on fees" question).

We agreed with Willamette as to its first cross-assignment of error,
concluding that plaintiffs' claims became moot when Weyerhaeuser acquired Willamette
and, consequently, that the trial court lacked jurisdiction to adjudicate plaintiffs' request
for attorney fees. Crandon I, 202 Or App at 548. As amplified below, the Supreme
Court reversed that decision in Crandon II, and we now consider the parties' remaining
assignments and cross-assignments of error.

We begin with plaintiffs' first assignment of error, which challenges the
trial court's conclusion that plaintiffs were not entitled to attorney fees because they failed
to segregate a common fund from which to award fees. In their supplemental brief on
remand, plaintiffs assert that the Supreme Court's analysis and disposition in Crandon II
necessarily, albeit implicitly, resolved that matter. We agree.

As noted, in Crandon II, 342 Or at 569, the Supreme Court concluded that
plaintiffs' claim for attorney fees survived after their substantive claims had become
moot. That conclusion proceeded from the Supreme Court's determination that plaintiffs'
attorney fee claim was based on the legal theory that "a court has the equitable power to
award fees to a shareholder who brings litigation that confers a benefit on a corporation or
on all of the corporation's shareholders." Id. at 562. The court first noted that that
theory--which it referred to as the "substantial benefit" test--had previously been
recognized in Oregon, citing Krause v. Mason, 272 Or 351, 537 P2d 105 (1975), and
Gilbert v. Hoisting & Port. Engrs., 237 Or 130, 384 P2d 136 (1963), cert den, 376 US
963 (1964). Crandon II, 342 Or at 562-63. The Supreme Court distinguished the
"substantial benefit" test from the "related but distinct 'common fund' theory":

"The equitable basis for plaintiffs' attorney fee claim often is
described as the 'substantial benefit' test, and we use that phrase because it
is consistent with the words used by this court when it awarded attorney
fees to the plaintiff-shareholder in Krause. The parties here, and some
courts, refer to that equitable theory as the 'common benefit' or 'corporate
benefit' theory. Those terms, however, are less appropriate than 'substantial
benefit' because the term 'common benefit' is easily confused with the
related but distinct 'common fund' theory for awarding attorney fees[.]"

Crandon II, 342 Or at 562 n 4. Under the common fund doctrine, "plaintiffs whose legal
efforts create, discover, increase, or preserve a fund of money to which others also have a
claim, may recover the costs of their litigation, including their attorney fees, from the
created or preserved fund." Id. at 566 (quoting Strunk v. PERB, 341 Or 175, 181, 139
P3d 956 (2006)).

Conversely, the substantial benefit doctrine originated in the idea that fees
may be awarded even in the absence of a fund. Crandon II, 342 Or at 566. Tracing the
development of that doctrine in Oregon, the Supreme Court observed that the equitable
rationale for awarding fees under either the substantial benefit theory or the common fund
theory--that is, that "fees are awarded not as in a 'prevailing party' case, to make the
plaintiff whole by shifting all costs to the wrongdoer, but instead to spread the costs
among those on whose behalf the case was brought and who benefitted from the
plaintiff's efforts"--was expressly adopted by the court in Gilbert. Id. Then, as the court
explained, in Krause, it relied upon Gilbert, as well as various treatises and cases from
other jurisdictions, to affirm an award of attorney fees to the plaintiffs in a shareholder
derivative action "based on the financial benefit that the plaintiffs' litigation had conferred
on the corporation and its other shareholders, even though that litigation did not result in
a common fund from which those fees could be paid." Crandon II, 342 Or at 567
(emphasis added).

In sum, the Supreme Court's analysis and disposition in Crandon II compels
a remand to the trial court unless Willamette succeeds on any of its remaining
cross-assignments of error. We address each in turn.

In its second cross-assignment, Willamette asserts that the trial court erred
in rejecting Willamette's argument that plaintiffs were precluded from recovering attorney
fees because they had not been "prevailing parties" in the underlying litigation.
Crandon II is dispositive of that contention. Specifically, the Supreme Court concluded
there that an award of fees under the substantial benefit theory is distinct from those
awarded in a "prevailing party" case and that a plaintiff in a shareholder derivative action
may recover attorney fees under the substantial benefit theory even if the plaintiff has not
obtained a judgment in its favor on the merits. Crandon II, 342 Or at 569.

We turn to Willamette's third cross-assignment of error, which challenges
the trial court's conclusion that plaintiffs had properly stated a claim for relief for attorney
fees under the substantial benefit doctrine. In recognizing that a plaintiff in a derivative
action may be entitled to attorney fees under the substantial benefit doctrine even though
the action is not pursued to final judgment, the Supreme Court in Crandon II relied on
shareholder derivative cases from other jurisdictions, particularly Delaware, and various
corporation law treaties. 342 Or at 567-68. Thus, it is appropriate for us to also look to
those sources to guide us in determining the contours of such a claim.

It is well settled under Delaware law that to be entitled to fees under the
substantial benefit doctrine, a party must demonstrate, as a preliminary matter, that
"(1) the suit was meritorious when filed; (2) the action producing benefit to the
corporation was taken by the defendants before a judicial resolution was achieved; and
(3) the resulting corporate benefit was causally related to the lawsuit." United Vanguard
Fund v. TakeCare, Inc., 693 A2d 1076, 1079 (Del 1997) (cited with approval in Crandon
II, 342 Or at 567-68). As the Delaware Supreme Court has explained:

"The reason for allowing an award of attorneys' fees to plaintiff's
counsel where a defendant corporation takes steps to settle or moot a case
and in so doing produces the same or similar benefit sought by the
shareholder's litigation is to prevent frustration of the remedial policy of
providing professional compensation for such suits when meritorious. This
rule insures that, even without a favorable adjudication, counsel will be
compensated for the beneficial results they produced, provided that the
action was meritorious and had a causal connection to the conferred
benefit."

The meaning of the "meritoriousness" requirement was fully explored in
Chrysler Corporation v. Dann, 223 A2d 384 (Del 1966). There the court observed that to
allow the award of fees upon the mere filing of a derivative action would encourage the
filing of many baseless actions solely for the purpose of obtaining counsel fees--a clearly
undesirable result. Id. at 386-87. Rather, to justify an award of fees,

"the action in which they are sought must have had merit at the time it was
filed. It may not be a series of unjustified and unprovable charges of
wrongdoing to the disadvantage of the corporation. The plaintiff must have
some factual basis at least for the making of the charges."

Id. at 387. On the other hand, the court expressly rejected the notion that the rule was so
demanding as to require that the action, to be meritorious, must be capable of surviving a
motion for summary judgment. Id. Rather, the court concluded:

"A claim is meritorious within the meaning of the rule if it can withstand a
motion to dismiss on the pleadings if, at the same time, the plaintiff
possesses knowledge of provable facts which hold out some reasonable
likelihood of ultimate success. It is not necessary that factually there be
absolute assurance of ultimate success, but only that there be some
reasonable hope."

Id.; see alsoKahan v. Rosenstiel, 424 F2d 161, 167 (3d Cir), cert den, 398 US 950 (1970)
(noting that "[i]n several cases which became moot, courts have said suits were
'meritorious' if they could have survived a motion to dismiss"). We agree with the
rationale expressed by the Delaware court and adopt its standard for determining the
"meritoriousness" of the predicate litigation as applicable to "substantial benefit"-based
attorney fee claims in Oregon.

"By its very nature, the derivative action impinges on the managerial
freedom of directors. Hence, the demand requirement of Chancery Rule
23.1 exists at the threshold, first to insure that a stockholder exhausts his
intracorporate remedies, and then to provide a safeguard against strike suits.
Thus, by promoting this form of alternative dispute resolution, rather than
immediate recourse to litigation, the demand requirement is a recognition of
the fundamental precept that directors manage the business and affairs of
corporations."

To excuse noncompliance with the prelitigation demand requirement, a
plaintiff must be able to articulate particularized facts showing that there is a reasonable
doubt either that (1) the directors are disinterested and independent for purposes of
responding to the demand or (2) the challenged transaction was otherwise the product of a
valid exercise of business judgment. If either prong is satisfied, demand is excused.
Brehm, 746 A2d at 256 (citing Aronson, 473 A2dat 814); see also Jennifer L. Berger,
Amy M. Hurwitz, Carol A. Jones, 13 FletcherCyclopedia of the Law of Private
Corporations § 5965, 79, 79 n 15 (rev ed 2004) (so stating; citing federal and state cases
applying Delaware law). In Brehm, the court explained:

"The rationale of Rule 23.1 is two-fold. On the one hand, it would allow a
plaintiff to proceed with discovery and trial if the plaintiff complies with
this rule and can articulate a reasonable basis to be entrusted with a claim
that belongs to the corporation. On the other hand, the rule does not permit
a stockholder to cause the corporation to expend money and resources in
discovery and trial in the stockholder's quixotic pursuit of a purported
corporate claim based solely on conclusions, opinions or speculations."

746 A2d at 255.

The parties here focus on the second prong of the Aronson test--that is,
whether plaintiffs alleged facts sufficient to create a reasonable doubt that the board's
actions were protected by the business judgment rule, thus excusing plaintiffs from
making a demand on the board. The business judgment rule is a "presumption that in
making a business decision the directors of a corporation acted on an informed basis, in
good faith and in the honest belief that the action taken was in the best interests of the
company." Aronson, 473 A2d at 812. "A hallmark of the business judgment rule is that a
court will not substitute its judgment for that of the board if the latter's decision can be
attributed to any rational business purpose." Unocal Corp. v. Mesa Petroleum Co., 493
A2d 946, 954 (Del 1985) (Unocal) (internal quotation marks omitted; emphasis added).
The business judgment rule generally operates to bar judicial inquiry into actions of
corporate directors taken in good faith and in the exercise of honest judgment in the
lawful and legitimate furtherance of corporate purposes. Thus, as a general matter, a
party seeking to avoid the prelitigation demand requirement must plead facts sufficient to
rebut the business judgment rule presumption. Growbow v. Perot, 539 A2d 180, 186-87
(Del 1988), overruled in part on other grounds by Brehm, 746 A2d at 254.

Once the enhanced judicial scrutiny of Unocal is triggered, it follows that,
for purposes of surviving a motion to dismiss, demand generally will be excused. That is
so because the burden then shifts to the board to satisfy the court that its actions were
reasonable; thus, the inquiry is necessarily fact-driven and requires a factual record not
before the court on a motion to dismiss. See In re Santa Fe Pac. Corp. Shareholder Lit.,
669 A2d 59, 72 (Del 1995) ("As the terminology of enhanced judicial scrutiny implies,
boards can expect to be required to justify their decisionmaking, within a range of
reasonableness, when they adopt defensive measures with implications for corporate
control. This scrutiny will usually not be satisfied by resting on a defense motion merely
attacking the pleadings."); see also Block, 1 The Business Judgment Rule at 1115
(quoting In re Sante Fe, 669 A2d at 72,for the proposition that, because the board then
has the burden of going forward with the evidence, "it is 'difficult[] [to] expeditiously
dispens[e] with claims seeking enhanced scrutiny at the pleading state where the
complaint is not completely conclusory" (brackets in original)).

It is unsurprising, given Unocal's rigors, that the parties' dispute with
respect to the third cross-assignment of error focuses on whether theheightened judicial
scrutiny prescribed by Unocal is triggered in this case. Plaintiffs argue that it is, because
their pleading alleges sufficient facts to raise the presumption that the board took
affirmative measures to entrench themselves in office in response to Weyerhaeuser's
takeover attempt.

Willamette counters that Unocal does not apply in this case because
plaintiffs' complaint does not allege with sufficient particularity that the board adopted
defensive measures in response to Weyerhaeuser's tender offer. In Willamette's view,
none of the events identified in plaintiffs' complaint would amount to a defensive measure
triggering Unocal scrutiny. Consequently, Willamette contends, it is entitled to the
ordinary presumption of the business judgment rule and, because plaintiffs failed to plead
facts overcoming that presumption, they failed to adequately plead demand futility under
ORS 60.261(2). That, in turn, would mean that plaintiffs' claims were not "meritorious
when filed," United Vanguard Fund, 693 A2d at 1079, precluding recovery of attorney
fees under the substantial benefit doctrine.

Plaintiffs' argument that its second amended complaint adequately pleaded
defensive measures sufficient to excuse demand under Unocal is based primarily on its
allegations relating to the following actions of the Willamette board: (1) "implementing"
the shareholders' rights plan (the "poison pill"); (2) adopting and expanding severance
packages (the "golden parachutes"); and (3) attempting to cause Willamette to acquire
GP's building products division. For the reasons discussed below, we conclude that the
factual allegations of plaintiffs' complaint are sufficient--considered collectively--to
demonstrate that the board's conduct was defensive in nature, thus triggering Unocal and
excusing demand under ORS 60.261(2).

We begin with plaintiffs' allegations regarding the "poison pill." That term
refers to a mechanism under which,

"[u]pon the occurrence of certain 'triggering' events, such as a would-be
acquiror's purchase of a certain percentage of the target corporation's
shares, or the announcement of a tender offer, all existing stockholders,
except for the would-be acquiror, get the right to purchase debt or stock of
the target at a discount. This action dilutes the would-be acquiror's stake in
the company and increases the costs of acquisition."

Unitrin, 651 A2d at 1369 n 6 (citing Robert J. Klein, The Case for Heightened Scrutiny in
Defense of the Shareholder's Franchise Right, 44 Stan L Rev 129, 129 n 6 (1991)).
Consummation of an unsanctioned tender offer thus becomes "prohibitively expensive
until such time as the rights are redeemed." Block, 1 The Business Judgment Rule at 1089
(internal quotation marks and footnote omitted). "The primary purpose of a poison pill is
to enable the board of directors of a target corporation to prevent the acquisition of a
majority of the company's stock through an inadequate or coercive tender offer, while
giving the board leverage to negotiate with potential acquirers." Corporations, 19 Am
Jur 2d 298 § 2186 (2004).

Here, plaintiffs' complaint includes several general allegations regarding
Willamette's poison pill--for example, that the board "attempted to entrench themselves as
managers and directors of the Company by implementing Willamette's shareholder rights
plan * * * in response to the Weyerhaeuser offers and in order to block and frustrate
Weyerhaeuser's bid" and that "[t]he purpose and intent of the implementation and
retention of the Poison Pill is to prevent any acquisition of Willamette by tender or
otherwise by any person who does not obtain the blessing of defendants." Those
allegations, however, are purely conclusory. See Brehm, 746 A2d at 254 ("Rule 23.1 is
not satisfied by conclusory statements or mere notice pleading"; rather the "pleader must
set forth particularized factual statements that are essential to the claim").

Plaintiffs' only particularized allegation regarding the poison pill is that, "as
of December 1, 2000, the Willamette board adopted a resolution deferring the
Distribution Date of the Rights * * * as a result of the commencement of the
Weyerhaeuser offer, until such later date as the board may substantially determine by
resolution." Thus, plaintiffs do not allege that the poison pill was adopted in reaction to
the announcement of Weyerhaeuser's tender offer, but only that the board acted to defer
its distribution date. The complaint asserts that the poison pill is triggered

"if and when (i) 10 days following a public announcement that * * * an
'Acquiring Person' * * * acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of Common
Stock; and (ii) 10 business days (or such later date as may be determined by
action of the Board of Directors) following the commencement of * * * a
tender offer or exchange offer (other than a Sanctioned Tender Offer) the
consummation of which would result in the beneficial ownership by a
person or group of 15% or more of the outstanding shares of Common
Stock."

Accordingly, if the board had not deferred the distribution date, it appears that the poison
pill would have been triggered by Weyerhaeuser's tender offer. In other words, the
board's conduct in deferring the distribution date of the poison pill actually stopped it
from taking effect and effectively terminating Weyerhaeuser's tender offer. Thus, the
upshot of plaintiffs' allegation is that the board took action enabling it to consider
Weyerhaeuser's offer in the future. That action--standing alone--is insufficient to
implicate the entrenchment concerns of Unocal.

However, plaintiffs' second amended complaint also alleged that, four days
after the board deferred distribution of the poison pill--and just six days after
Weyerhaeuser took its tender offer to Willamette's shareholders--the board also adopted a
"golden parachute" program. (12) Specifically, the complaint details a series of
agreements that the Willamette board entered into, beginning on December 5, 2000, and
continuing through December 21, 2000, to provide severance pay and other benefits to
various employees in the event their employment was terminated within a specified time
after a change in control of the corporation. The "parachutes" covered key executives and
top managers, as well as other salaried employees. The agreements also provided for an
additional payment--known as a "gross-up" payment--to relieve employees from any
excise tax obligations that would arise from the "parachute" payments. The complaint
alleged that, as a result of the expansive nature of the golden parachutes and the particular
manner in which they are triggered, it is "highly likely that the Employees covered by
these Agreements will be entitled to exercise these rights" and that, consequently, any
entity purchasing Willamette would be subject to a cost of $60 million to buy out those
employees or otherwise defend against lawsuits initiated by them. Those allegations
describe facts--particularly with respect to the timing of the board's adoption of the
golden parachutes and the expansiveness of those provisions--to demonstrate that
Willamette's board was operating in a defensive mode in response to Weyerhaeuser's
efforts to take over the company.

Finally, plaintiffs' allegations regarding the board's attempt to enter into a
business arrangement with a division of GP corroborate the sufficiency of plaintiffs'
allegations pertaining to the golden parachutes with respect to the "defensive" nature of
the board's conduct. The second amended complaint alleged that "defendants attempted
to irreparably impair Willamette's operations by entering into a business combination
which will increase Willamette's debt to equity retained by at least 50% and will subject
Willamette to billions of dollars of potential asbestos related liability." It also alleged that
Willamette was "in negotiations with [GP] regarding a possible combination of
Willamette with the building-products business of [GP]" and that "takeover experts
believe that 'a deal in certain forms could create tax issues that would be unappealing for
Weyerhaeuser.'" The complaint further alleged that Rogel, president and chief executive
officer of Weyerhaeuser, sent a letter to Willamette's chairman of the board and its
president and chief executive officer, informing them that he had "heard from 'credible
sources that Willamette is actively considering a significant acquisition'" and "strongly
encouraging [them] not to enter into a transaction that would damage your shareholders'
value or otherwise preclude a combination with Weyerhaeuser." Those statements--accepted as true and giving plaintiffs the benefit of all reasonable inferences to be drawn
from them--are adequate to plead that Willamette's proposed transaction with GP was
initiated as a "defensive acquisition" in an effort to make the company less attractive to
Weyerhaeuser.

In sum, we conclude that, viewed in their totality, plaintiffs' allegations
regarding the Willamette board's use of the poison pill, its adoption of a bevy of golden
parachutes, and its attempted deal with GP sufficiently describe a pattern of defensive
conduct initiated in response to Weyerhaeuser's tender offer. Under Unocal, those
allegations are sufficient to raise a "reasonable doubt that the challenged transaction was
otherwise the product of a valid exercise of business judgment," Brehm, 746 A2d at 256
(internal quotation marks omitted), excusing plaintiffs' noncompliance with the
prelitigation demand requirement of ORS 60.261(2). Consequently, the trial court
correctly concluded that plaintiffs' pleadings were sufficient to satisfy the first,
"meritorious suit" element of the substantial benefit doctrine. See ___ Or App at ___ (slip
op at 11-12). We thus reject Willamette's third cross-assignment of error challenging that
ruling.

We proceed to Willamette's fourth cross-assignment of error, which asserts
that the trial court erred "in refusing to enter judgment in favor of defendants after it
denied plaintiffs' request for attorney fees." The gist of Willamette's argument, as we
understand it, is that, once the trial court ruled that plaintiffs' second amended complaint
failed to sufficiently allege the basis of entitlement to attorney fees, as required by ORCP
68 C(2)(a), the case was over--and the only procedurally available and appropriate course
was for the trial court to enter a judgment of dismissal. Given that, Willamette reasons,
the trial court had no discretion to allow plaintiffs leave to supplement their pleadings so
as to remedy the deficiency under Rule 68 C(2)(a).

The fundamental flaw in Willamette's position is that the case was not over.
Although the trial court had ruled that plaintiffs' then-extant second amended complaint
did not sufficiently plead an entitlement to attorney fees, the court had not yet ruled on
Willamette's pending motion to dismiss the derivative claims pleaded in that complaint--claims that sought not only attorney fees but also damages and injunctive relief. See ___
Or App at ___ (slip op at 3-4) (describing procedural history). Thus, at the time the trial
court granted plaintiffs' motion to supplement, plaintiffs' substantive claims against
Willamette were still pending before the court.

That circumstance dispositively distinguishes this case from Mulier, the
sole authority that Willamette invokes as support for its contention that the trial court
erred in allowing plaintiffs to file their supplemental third amended complaint. In Mulier,
the defendants moved for summary judgment and, in a memorandum of law supporting
the summary judgment motion, but not in the motion itself, the defendants alleged a right
to recover attorney fees. The trial court allowed summary judgment and awarded attorney
fees. On appeal, we rejected the plaintiff's challenge to the fee award. Mulier v. Johnson,
163 Or App 42, 986 P2d 742 (1999), rev'd on other grounds, 332 Or 344, 29 P3d 1104
(2001). Specifically, we held that the defendants were not precluded, due to
noncompliance with ORCP 68 C(2)(b), from recovering fees with respect to one of their
claims--the "statutory duty" claim--in part because the memorandum of law served the
purposes of ORCP 68 with respect to that claim. 163 Or App at 47-49. In remanding the
case for the trial court to consider the plaintiff's objections to those fees, we also stated,

"contrary to defendants' assertions, on remand the trial court would not
'have discretion to allow defendants, if necessary, to amend their motion for
summary judgment' to allege an entitlement to fees associated with the
section 1983 claims. Defendants' motion for summary judgment has been
fully adjudicated and, thus, is not susceptible to 'amendment.'"

Id. at 47.

Of course, given that our opinion was subsequently reversed by the
Supreme Court in Mulier, our dictum as to the proper scope of remand there was
ephemeral. Beyond that, however, the predicate for our observation there does not exist
here. In Mulier, the trial court had conclusively--by way of summary judgment--finally
disposed of the plaintiff's substantive claims, and we had affirmed that disposition on
appeal. Consequently, there truly was "nothing left for the court to do" with respect to the
merits of the plaintiff's claims. Here, in contrast, plaintiffs' substantive claims against
Willamette remained pending at the time that plaintiffs requested leave to supplement
their complaint. Those claims had not been "fully adjudicated."

As we have previously held, trial courts have broad discretion under ORCP
23 in determining whether to allow a party to amend or supplement a pleading, McAmis
Industries v. M. Cutter Co., 161 Or App 631, 636, 984 P2d 909, rev den, 329 Or 553
(1999); Hall v. Fox, 106 Or App 377, 380, 808 P2d 99 (1991); Benj. Franklin Fed.
Savings and Loan v. Phillips, 88 Or App 354, 357, 745 P2d 437 (1987), and we review
only for abuse of that discretion. Id. In Benj. Franklin Fed. Savings and Loan, we noted
that, "[a]lthough ORCP 68C clearly states that the right to attorney fees shall be asserted
in a pleading, there is nothing in the rule to suggest that an amendment to comply with the
rule is precluded." Id. We then held that the trial court's discretion under ORCP 23 A
extends to a motion to amend a pleading to assert an entitlement to attorney fees under
ORCP 68 C where the amendment is allowed before entry of final judgment and the
defendant has not been prejudiced. Id.

Likewise, in Hall, we affirmed the trial court's grant of the plaintiff's motion
to amend her complaint after trial to plead an entitlement to attorney fees, concluding
that, because the defendant had not been prejudiced as he claimed, the trial court did not
abuse its discretion in allowing the amendment. 106 Or App at 380. Cf. Wiper v.
Fawkes, 198 Or App 331, 336-37, 109 P3d 798 (2005) ("Neither ORCP 68 C(2) nor our
cases establish that a party must assert a right to recover attorney fees at the first
appropriate opportunity in order to be entitled to recover fees.").

The trial court's allowance of leave to supplement in this case was well
within the bounds of discretion as described in Hall and Benj. Franklin Fed. Savings and
Loan. Further, Willamette does not--and cannot plausibly--claim to have been prejudiced
by the allowance of the supplemental complaint because of some lack of notice that
plaintiffs were seeking attorney fees. Accordingly, we reject Willamette's fourth cross-assignment of error.

We pause--and briefly recapitulate: We have, based largely on Crandon II,
concluded that the trial court erred, in its stated grounds, in holding that plaintiffs were
precluded from recovering attorney fees. We have further rejected each of Willamette's
three remaining cross-assignments of error, any of which would, independently, have
compelled affirmance. Thus, we reverse and remand for the trial court to consider
unresolved matters pertaining to plaintiffs' asserted entitlement to fees under the
substantial benefit theory, including, without limitation, whether "the action producing
benefit to the corporation was taken by the defendants before a judicial resolution was
achieved" and whether "the resulting corporate benefit was causally related to the
lawsuit." United Vanguard Fund, 693 A2d at 1079.

One matter remains, which, for the sake of cogent discussion and
disposition, we have deferred to the last. In their second assignment of error, plaintiffs
challenge the trial court's allowance of partial summary judgment in favor of Willamette
with respect to plaintiffs' asserted entitlement to recover "fees on fees." Plaintiffs argue
that it is well settled in Oregon that a party may recover its attorney fees incurred as part
of fee litigation and that the trial court erred in abandoning that precedent and ruling that
they could not, as a matter of Delaware law, recover those fees.

Willamette counters that, because plaintiffs premised their primary attorney
fee request on the Delaware substantial benefit doctrine, they cannot now reasonably
contend that the court erred in applying Delaware law with respect to the derivative "fees
on fees." According to Willamette, fees incurred after the date that a tender offer is
accepted (or other sought after corporate change takes place) are not recoverable under
Delaware law, with the rationale being that fees incurred after that date are for the benefit
of counsel, rather than for the benefit of the shareholders of the corporation. While
acknowledging that Oregon courts generally permit the recovery of fees on fees when a
statute or contractprovides for prevailing party attorney fees, Willamette also points out
that no Oregon court has extended that concept to fee recovery under the substantial
benefit doctrine.

We conclude that plaintiffs have the better argument. As plaintiffs
emphasize, there is longstanding precedent in Oregon that a party may recover its attorney
fees incurred as part of the fee application and litigation process. In Johnson v. Jeppe, 77
Or App 685, 688, 713 P2d 1090 (1986), recognizing that ORCP 68 is the governing
mechanism for awarding attorney fees "pursuant to contract and to most statutes," we held
that "[t]he enforcement of a judgment and final collection of money due are 'legal
services related to the prosecution or defense of an action' [as provided in ORCP 68 A(1)]
and may be considered in awarding attorney fees." Later, in Emerald PUD v. Pacificorp,
104 Or App 504, 507, 801 P2d 141 (1990), rev den, 311 Or 222 (1991), we relied on
Johnson to reject the plaintiff's argument that the trial court's award of "'fees for
recovering fees' was not permissible, because the process of recovering fees is not part of
the 'prosecution of an action'" for purposes of ORCP 68. We explained that, like
enforcement of a judgment, the recovery of attorney fees to which a prevailing party is
entitled by statute is "related to the prosecution or defense of the action." Id.

2. Although Willamette refers to that concept as the "corporate benefit" or "common
benefit" doctrine, we use the nomenclature adopted by the Supreme Court, seeCrandon II, 342
Orat 562 n 4, and refer to it as the "substantial benefit" doctrine throughout this opinion.

3. Although the mootness issue was not presented in Krause and Gilbert, the court in
Crandon II reasoned that its decision was consistent with the rationale underlying those cases, as
well as with other courts that had considered the issue and the authorities upon which it relied in
awarding fees in Krause. Crandon II, 342 Or at 565-69.

4. Willamette asserts that, because any benefit from the litigation did not flow to
Willamette as a corporation, but was, instead, distributed to Willamette's former shareholders
when they were cashed out, the trial court was nevertheless correct in concluding that plaintiffs
could not recover attorney fees because they "failed to take any steps to spread their fees among
the benefitted shareholders." (Emphasis added.) That position, however, is functionally
dependent on casting plaintiffs' claim as derived from the "common fund" theory of recovery--a
characterization that the Supreme Court rejected in Crandon II.

We note, further, that the record in this case is, as yet, insufficiently
developed to assess the equities of, in effect, requiring Weyerhaeuser, as the ultimately
successful hostile bidder and Willamette's successor in interest, to assume some or all of the fees
incurred in securing a corporate benefit for Willamette. See First Interstate Bancorp
Shareholder, 756 A2d 353 (Del Ch 1999), aff'd, 755 A2d 388 (Del 2000) (addressing concept).

6. ORS 60.261(2) was enacted in 1987 as part of the revised Oregon Business
Corporation Act. Or Laws 1987, ch 52, § 67. It adopted, without substantive change, what was
then section 7.40 of the Revised Model Business Corporation Act (1984). Oregon State
Bar Business Law Section, Model Business Corporation Act Task Force, Report on Oregon
Revised Model Business Corporation Act (Mar 24, 1987), § 67, p. 33 ("Subsection (2) requires
that the complaint allege a demand on the corporation prior to instituting litigation or explain
why no demand was made.").

"The complaint shall also allege with particularity the efforts, if
any, made by the plaintiff to obtain the action the plaintiff desires
from the directors or comparable authority and the reasons for the
plaintiff's failure to obtain the action or for not making the effort."

FRCP 23.1 is similar. It provides, in part, that the complaint must "state with
particularity" "any effort by the plaintiff to obtain the desired action from the directors or
comparable authority * * *" and "the reasons for not obtaining the action or not making the
effort." See also Thomas P. Kinney, Stockholder Derivative Suits: Demand and Futility Where
the Board Fails to Stop Wrongdoers, 78 Marq L Rev 172 (1994).

8. In Oregon, as in many jurisdictions, the "fundamental precept" that Aronson
references is embodied in statute. ORS 60.301(2) provides, in part: "All corporate powers shall
be exercised by or under the authority of, and the business and affairs of the corporation managed
under the direction of, the board of directors[.]"

9. In meeting that burden, the board must show that (1) it had reasonable grounds for
believing that a danger to corporate policy and effectiveness existed and (2) the defensive
response was reasonable in relation to the threat posed. Unitrin, Inc. v. American General Corp.,
651 A2d 1361, 1373 (Del 1995).

10. We note that, in Kahn v. Sprouse, 842 F Supp 423, 426-27 (D Or 1993), the
federal district court for the District of Oregon assumed the applicability of the Unocal standard
under Oregon law, but held that it was not triggered where the plaintiffs had failed to identify any
defensive measures adopted by the board but alleged only that it had rejected merger proposals.
The court noted that "saying 'no' to a merger proposal is a far cry from adopting defensive
measures designed to impede or defeat a change in control of the company."

11. Plaintiffs' third amended complaint was filed after Willamette took the actions
that mooted plaintiffs' substantive claims and allegedly resulted in "substantial benefit" to
Willamette; thus, there can be no "causal relationship" between that complaint and Willamette's
actions. Cf. Allied Artists Pictures Corp., 413 A2d at 879 (fees allowed under substantial benefit
theory where, at the time of mooting on appeal, the plaintiff's contentions were still capable of
producing the effect intended by filing the suit).

Although the second amended complaint is the temporally operative
pleading for purposes of assessing whether plaintiffs' substantive claims were "meritorious" for
purposes of the substantial benefit doctrine, the trial court, as noted, determined that that
complaint did not satisfy the requisites of ORCP 68 C(2)(a). See ___ Or App at ___ (slip op at
4). The propriety of the trial court's ruling allowing plaintiffs to subsequently file their third
amended complaint, which did satisfy those requirements, is the subject of Willamette's fourth
cross-assignment of error, which we address below. See ___ Or App at ___ (slip op at 25-28).

12. As we noted in Crandon I, "'[a] golden parachute is a contractual arrangement
between [a corporation] and one or more executive officers whereby the [corporation] promises
to provide the executive with substantial benefits over and above those the executive would
normally receive if the officer is terminated as a result of a change in corporate control.' Carol
Goforth, Proxy Reform as a Means of Increasing Shareholder Participation in Corporate
Governance: Too Little, But Not Too Late, 43 Am U L Rev 379, 424 n 271 (1994)." 202 Or
App at 541 n 2 (bracketed material in original).